Victims of Denver’s housing stampede weigh in on perennial construction-defects bill

James Roy married three years ago and has a two-year old baby. For nine months he and his wife have been looking to buy the family’s first home, a condo. Even though Roy, who works in urban planning, couldn’t be more “plugged in” to the downtown Denver housing market, they haven’t been able to find anything in their $250,000 price range.

“It’s been frustrating, to say the least,” said Roy.

The pursuit has gone from casual to nearly obsessive. They check listings multiple times a day and visit open houses nearly every week. Now Roy is staking his hope in a construction-defects bill lawmakers are considering this session.

The search

Like so many other millennials, the Roys want to live near downtown. They’re not too picky about the neighborhood. Washington Park, Capitol Hill, Park Hill, Whittier, RINO, Highlands, Five Points, Congress Park, East Colfax, West Colfax – they’ll take what they can get and have their eyes set on a condo for “the pleasures of life without a car,” Roy said.

“I’ve actually lost count on the number of places I’ve put an offer on — it’s somewhere between 10 and 15,” said Roy. “We’ve been under contract twice and unfortunately had those situations fall through due to HOA fees, which put our debt-to-income rating over the top.”

The couple has also been outbid, even though they have put in an offer for $40,000 over the asking price.

“There are something like 2,000 millennials moving to the Denver metro area every month,” Roy noted. “We’re not only competing with peers in our bracket, which is the most frustrating part, but also … cash buyers and investors who come in without any of the hassle of inspections and everything an FHA loan comes with. It makes it that much harder.”

Roy has been following the construction-defects debate. Reforming the existing law so that more construction-defects cases are handled outside of court drives down the price of home builders’ insurance and thus the overall cost of new condos, he says.

That’s because, at its core, the construction-defects-reform debate is really about why Denver isn’t building a plethora of affordable, transit-oriented, high-density condos for young urban families like Roy’s.

Proponents of reform say it means the difference between a Denver with affordable housing options and a city where only the rich can own their shelter. Opponents say calling a constructions-defect bill an affordable housing strategy is an underhanded move by developers to gut consumer protections. Some residents say shoddy condos are altogether a bad idea. Those protections are needed.


The broken home

Take Jonathan Harris. He bought his brand new Five Points condo back in 2004. He loved the downtown location and things were swell for the first few years. Then the rain came.

“Our building’s not waterproof, and that’s really what it comes down to,” said Harris. “You hope for your building to be waterproof. It’s those little things.”

As water saturated the stucco-faced structure, ill-affixed awnings and balconies began to sag dangerously. The damage from leaks got so bad that two of the building’s units are still entirely uninhabitable.

A decade of legal battles later, Harris became the chair of an organization called “Build Our Homes Right,” which is fighting construction-defect reform.

At home, his condo renovations are ongoing.

“I’ve heard one of the critiques is that there’s too many unnecessary lawsuits. I don’t think that’s true,” said Harris. “I don’t think anybody would go through this if they had a choice. I’m a homeowner, I don’t get paid for this. It’s taken a lot of my time and it’s so much stress arguing back and forth.”

Ultimately after trying mediation, Harris’ HOA settled with the builders and developers just as they were about to go to court over the issue.

“Our association didn’t bring the claim to get money. In fact we’re still going to be short,” said Harris. “We’re incorporating the rest of the costs into our long-term fees. We’ll do the more serious things now and the rest later.”

Even under existing law, which developers contend is prohibitively strict, their less-than-whole settlement is considered a ‘success,’ Harris said. He can’t support what he sees as an effort to further chip away at homeowners’ rights by forcing home-owners associations into expensive arbitration procedures instead of court. And he’s not sure that making it harder to fix a defect will really make builders’ insurance – and thus their products – cheaper.

“If you don’t have a lot of problems, your insurance rates will be lower. If you’re an at-risk builder, then of course your rates will be higher,” said Harris. “Quality construction just fixes everything. Let’s just do it right in the beginning, and it won’t be a problem later. It’s so simple.”


The Politics

Say the words “construction defects reform” to most folks and you’re likely to glaze some eyes. Say it to anyone in the development industry or at the State Capitol and you’ll get a knowing nod. Changing how condo owners settle construction complaints is one of the oldest, most heated and most technical debates under the gold dome.

SB 177, the construction defect reform bill, has bipartisan support and has already passed in the Senate. However, it faces a steep uphill battle in the House, where Speaker Dicky Lee Hullinghorst, D-Boulder, has called it a terrible policy that limits homeowners’ rights and doesn’t solve the issue of affordable housing. Even so, insiders say the reform bill has enough votes to pass if it can make it to the House floor.


A housing crunch — photo by Tessa Cheek. 


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